Favourable weather in West Africa drives cocoa prices lower

Cocoa prices have taken a sharp nosedive as London cocoa hits a four-week low, thanks to the recent favorable weather conditions along the West African coast. Akin Laoye, the CEO of FTN Cocoa Processors, joined CNBC Africa to discuss the movements in commodity prices and provide forecasts for the upcoming season. The drop in cocoa prices spells good news for the top producers in countries such as Ghana and Cote d'Ivoire, as well as the end users of this coveted commodity. Despite facing challenges like adverse weather conditions and crop diseases, cocoa prices has been at record levels. Laoye highlighted that the recent drop in prices is influenced by speculative activity and market uncertainty. While the prices fluctuate, the underlying fundamentals remain unchanged. Ghana and Cote d'Ivoire have taken steps to tackle issues such as climate change, diseases, and smuggling. However, Laoye pointed out that it would take Nigeria a few years to ramp up production and capitalize on the opportunity to become a major cocoa producer in the region. Smallholder farmers dominate cocoa production across West Africa, with Nigerian farmers already benefiting from high prices. Laoye suggested that Nigeria should focus on incentivizing young people to engage in cocoa farming to boost production. Despite the price volatility driven by market speculation, Laoye indicated that a structural shift in the cocoa market is underway. While current prices may not be sustainable, they are likely to remain higher than historical levels due to global inflation and changing consumer preferences. As for processors like FTN Cocoa, Laoye explained that navigating industry challenges is difficult due to market uncertainties and shifting consumer behaviors. With consumers reevaluating their spending amid global inflation, processors are treading cautiously to avoid potential losses. As the industry gears up for the upcoming big crop season in September, stakeholders are bracing themselves for further market shifts and challenges.